State Bank revises Ijara Sukuk transaction structure
State Bank of Pakistan revised the transaction structure of the government of Pakistan domestic Ijara Sukuk on Jinnah International Airport Karachi (JIAP), pursuant to discontinuation of Trust Act 1882, a circular said.
"The future issuances of Ijara Sukuk on JIAP Karachi as underlying asset, and reopening there against, will be carried out under the revised transaction structure and documentations following the repeal of the Trust Act 1882," the central bank said in its circular.
It added that the documentation for this structure would include a Sukuk subscription and issuance undertaking, purchase agreement, title agency agreement, and cost undertaking and rules. "The Jinnah International Airport Karachi together with identified, unencumbered and undisputed land of Civil Aviation Authority (CAA) surrounding the JIAP, identifiable by survey numbers and area, have been identified as the proposed Assets to facilitate issuance of GoP Ijarah Sukuk," said the circular.
"Valuation of the Assets is to be carried out by two PBA [Pakistan Banks Association] approved independent valuators, and the lower of the two valuations will be accepted as the sale price of the Assets."
The SBP further said it would conduct an auction through which Sukuk investors would be identified. Noncompetitive bidders may also submit their bid for the Sukuk, it added. The investors would execute the Sukuk subscription undertaking to record the commitments of the Investors to subscribe to the Sukuk to be issued by Pakistan Domestic Sukuk Company Limited (PDSCL), it noted. Under the Sukuk subscription undertaking, the investors may appoint PDSCL as their agent (investment agent") for purchase of the assets on their behalf and for the purposes set out in Sukuk issuance undertaking.
The SBP said the primary dealers would also sign the subscription undertaking on behalf of successful non-competitive bidders. PDSCL (as agent of Investors) and SBP's Banking Services Corporation would execute an Agency Agreement whereby PDSCL would appoint SBP-BSC as its agent to collect proceeds from the investors, collect rentals and other payments due from the government and distribute the same to the Investors, and act as reference agent and registrar for the investors.
Earlier, the National Assembly Standing Committee on Finance and Revenue during a visit to Karachi recommended third party audit on the appointments made by the government in National Bank of Pakistan. The NA body further directed that the selection of an audit firm may be made from the existing panel of State Bank of Pakistan (SBP). A meeting of the NA standing committee, chaired by MNA Faiz Ullah Kamoka, was held at the SBP. The committee was briefed by SBP Governor Dr Reza Baqir on the amendments related to the Banking Services Corporation (BSC) Act which were desired by the central bank. He explained that these amendments were needed to ensure smooth operations of the BSC.
With reference to an another agenda item related to the National Bank, the SBP governor and Deputy Gover-nor Banking Jameel Ahmad briefed the committee on the ' Fit and Proper Test' of the incumbent president NBP. Later on, Baqir, Ahmad and SBP BSC Managing Director Muhammed Ashraf Khan replied to the various queries of the NA standing committee. After detailed discussions, the committee unanimously passed the Banking Services Amendment Bill, 2020. However, the committee members expressed concerns over the qualifications required for said position and the differences in the degree (qualifications) of president NBP.
Ahmad explained that the services of NBP President Arif Usmani were recommended because of his vast experience spread over three-and-half decades in the banking sector. The NA committee chairman was of the view that the government had to clear earlier allegations against Usmani's previous track record when he was appointed as the president of National Bank.
On the occasion, the NBP president briefed the committee about the hiring status of the employees of the bank from 2019 to 2020. The most critical element of any organisation were its people and that was particularly true of a service organisation such as a bank, Usmani said.
The quality of NBP's Senior Resources across a variety of disciplines were identified as a serious gap as evident by large number of unaddressed audit comments which indicate lack of will for resolving them, repeated breaches, that resulted in reputational loss and lack of public trust, he added.
The NBP president further said that the recruitment process was done by using existing Board's approved policies and process for external recruitments. He informed the committee that all the senior positions were advertised internally (within the bank), accordingly. Internal candidates were assessed and eligible candidates were short listed in interviews, however, none of them were found up to the mark, he elaborated.